ACIT, Chandigarh V. M/s Indo Farm Equipment Ltd., Chandigarh

ITA 661/CHANDI/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9827 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-06-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 11-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Section: 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI. BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 661/CHD/2014 ASSESSMENT YEAR: 2011-12 THE ACIT, CIRCLE 3(1), VS. M/S INDO FARM EQUIPMEN T LTD., CHANDIGARH CHANDIGARH PAN NO. AAAC1982A (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JYOTI KUMARI RESPONDENT BY : SHRI AJAY JAIN DATE OF HEARING : 16/06/2015 DATE OF PRONOUNCEMENT : 19/06/2015 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 24.04.2014 OF CIT(A), CHANDIGARH. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS:- 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS & CONTRAR Y TO FACTS AND LAW. 2. THE LD. CIT(A) IS NOT RIGHT IN HOLDING THAT DEDUCTI ON U/S 80 IC CAN BE CONTINUED @ 100% OF NET PROFITS OF ELIGIB LE BUSINESS BEYOND FIVE YEARS ON THE PRETEXT OF SUBSTA NTIAL EXPANSION. 3. THE LD. CIT(A) IS NOT RIGHT IN ALLOWING DEDUCTION @ 100% U/S 80 IC BEYOND FIVE YEARS AND THEREBY IMPLYING TH AT THE INITIAL ASSESSMENT YEAR, AS DEFINED UNDER THE PROVI SIONS OF SECTION 80 IC CAN BE CHANGED OR THAT THERE CAN BE M ULTIPLE INITIAL ASSESSMENT YEARS IN THE ABSENCE OF ANY SUCH PROVISION IN THE ACT. 2 4. THE LD. CIT(A) IS NOT RIGHT IN ALLOWING 100% DEDUCT ION TO THE ASSESSEE BEYOND 5 YEARS ON A CLAIM MADE BY THE ASSESSEE THAT SUBSTANTIAL EXPANSION HAS TAKEN PLACE WHERE THE FACTS AND CIRCUMSTANCES OF THE CASE POINTS TOWA RDS A MERE RECONSTRUCTION OF BUSINESS AT THE MOST, INVITI NG THE PROHIBITORY CLAUSES U/S 80 IC INTO OPERATION. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT ASSE SSEE HAD SET UP ITS UNIT IN FINANCIAL YEAR 2001-02 AND STARTED CLAIMING DEDUCTI ON U/S 80IB FROM ASSESSMENT YEAR 2002-03 (I.E. FIRST YEAR OF OPERATION). LATER ON, THE ASSESSEE CARRIED OUT SUBSTANTIAL EXPANSION AND STARTED CLAIMING 100% DED UCTION FROM ASSESSMENT YEAR 2007-08 FOR NEXT FIVE YEARS. THEREFORE, CLAIM WAS F OR 100% DEDUCTION FOR ALL THE TEN YEARS. ACCORDING TO ASSESSING OFFICER, THIS CLA IM WAS NOT JUSTIFIED IN VIEW OF SECTION 80IC(6). HE FURTHER OBSERVED THAT ASSESSEE WAS ENTITLED TO DEDUCTION ONLY FOR 30% FROM ASSESSMENT YEARS 2007-08 TO 2012- 13 AND ACCORDINGLY A SHOW CAUSE NOTICE WAS ISSUED WHY DEDUCTION U/S 80IC SHOU LD NOT BE RESTRICTED TO 30% OF THE PROFIT. IN RESPONSE IT WAS STATED AS UNDER:- AS PER THE PROVISIONS OF SECTION 80 IC (3), IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-CLAUSE (II) OF CLAUSE (A) OR SUB-CLAUSE(II) OF CLAUSE(B) OF SUB-SE CTION (2), ONE HUNDRED PERCENT OF SUCH PROFIT & GAINS FOR GIVE ASS ESSMENT YEARS, COMMENTING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER, TWENTY-FIVE PERCENT (OR THIRTY PERCENT WHERE THE ASSESSEE IS A COMPANY) OF PROFIT & GAINS. FURTHER, AS PER 80 IC(8)(V), INITIAL ASSESSMENT YE AR MEANS THE ASSESSMENT YEAR RELEVANT TO BE PREVIOUS YEAR IN WHI CH THE UNDERTAKING OR THE ENTERPRISE BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS, OR COMMENCES OPERATION OR COMPLETES SUBSTANTIAL EXPANSION. SO, FROM THE ABOVE DEFINITION, IT IS VERY MUCH CLE AR THAT EVEN IF AN ENTERPRISE HAS MADE SUBSTANTIAL EXPANSION IT IS AGAIN ELIGIBLE FOR 100% DEDUCTION FOR FIVE ASSESSMENT YEA RS U/S 80 IC, BUT SUBJECT TO THE OVERALL LIMIT FOR DEDUCTION YEARS OF WITHIN 10 YEARS FROM THE FIRST YEARS OF TAKING DEDU CTION U/S 80IB/80IC. IN OUR CASE, THE ASSESSEE HAD FIRST AVAILED THE DE DUCTION U/S 80 IB, FOR SETTING UP ITS TRACTORS UNIT FOR INITIAL AS SESSMENT YEAR OF 3 2002-03. LATER ON DURING THE ASSTT. YEAR 2007-08, I T WENT INTO SUBSTANTIAL EXPANSION & THEREFORE CLAIMED THE BENEF ITS OF DEDUCTION U/S 80 IC. 4. THE ASSESSING OFFICER DID NOT FIND FORCE IN THES E SUBMISSIONS AND RESTRICTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IC TO 30%. 5. ON APPEAL, LD CIT(A) ALLOWED FULL 100% DEDUCTION BY FOLLOWING THE ORDER OF HIS PREDECESSOR FOR ASSESSMENT YEAR 2007-08 IN I TA NO. 521 / 2009-10 VIDE ORDER DATED 26.3.2010. 6. BEFORE US LD. DR STRONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER. 7. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT THIS ISSUE IS NOW SQUARELY COVERED BY THE DECISION OF THE CHANDIG ARH BENCH OF THE TRIBUNAL IN THE CASE OF HYCRON ELECTRONICS, SOLAN V CIT IN 798/ CHD/2012 AND OTHERS WHEREIN IT IS CLEARLY HELD THAT BENEFIT OF SUBSTANTIAL EXPA NSION IS AVAILABLE ONLY TO EXISTING UNIT. SINCE THE UNIT OF THE ASSESSEE WAS E XISTING AS ON 1.4.2004 WHEN PROVISIONS OF SECTION 80IC WERE INTRODUCED, THEREFO RE, ASSESSEE IS ENTITLED TO BENEFIT OF 100% DEDUCTION ON SUBSTANTIAL EXPANSION. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND FORCE IN THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE. WE HAV E DISCUSSED THIS ISSUE IN DETAIL IN THE CASE OF HYCRON ELECTRONICS, SOLAN V C IT (SUPRA). THEREIN IT WAS ULTIMATELY HELD THAT BENEFIT OF DEDUCTION U/S 80IC ON SUBSTANTIAL EXPANSION WAS AVAILABLE ONLY TO THE EXISTING UNDERTAKING. THE EXI STING UNDERTAKING FOR THIS PURPOSE WOULD MEAN THE UNDERTAKING WHICH WAS EXISTI NG ON THE DATE OF INTRODUCTION OF SECTION 80IC I.E. 1.4.2004. THEREFO RE, IN OUR OPINION, THE ASSESSEE IS ENTITLED TO 100% DEDUCTION AFTER DOING THE SUBST ANTIAL EXPANSION OF THE EXISTING UNIT WHICH CAME INTO EXISTENCE IN ASSESSME NT YEAR 2002-03 I.E. MUCH BEFORE THE INCORPORATION OF SECTION 80IC. THEREFORE , WE FIND NOTHING WRONG WITH 4 THE ORDER OF LD. CIT(A) AND UPHELD THE SAME. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 19/06/2015. SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19 TH JUNE, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR